Growth Hacking for Lean Startups: How to Get, Keep and Grow Customers

2. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software ToddWyder, CEO of Pathfinder Software, is obsessed with creating great software that users love, and he is also very passionate about building the Chicago-tech community, currently serving as organizer for both theChicago Product ManagementAssociation and theChicago Lean StartupCircle. Over a decade of delivering successful software applications, providing clients with the technology to enable business breakthroughs and competitive advantage.Companies hire Pathfinder to design, develop and deliver Healthcare software products faster and better than they can do themselves.

14. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Most startup founders focus heavily on product but most of a startup's risk lies in distribution Dave McClure

24. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Don’t Focus on AcquisitionWhen Activation and Retention are Low Visited Site Signed Up Activation Billed 2,177 14 3 1 0.6% 21.4% 33.3% 0.0%

27. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software What to/Not toTest LinkBaitPro Get Started For recreational use only. Do not staple or paper clip. All models over 18 years of age. Prize not redeemable for cash value. If condition persists, consult your physician. No user-serviceable parts inside. Test the Headline Image vs. Video Call to action text and color Don’t spend a lot of time testing the copy

28. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Classic A/BTesting I’m on Twitter Follow me on Twitter Follow me on Twitter You should follow me On twitter You should follow me On twitter You should follow me On twitter here You should follow me On twitter here 56% 38% 27% 115% 173%

31. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software 5. Create Interventions Signed Up Login Uploaded Photos Tag Photos 2,177 366 41 3 16.8% 11.2% 7.3% 0.0% • Email • In App

35. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Bugsnag captures errors from your web and mobile applications. The first email they send to new signups is very simple, but has been yielding great results. Hey {{ first_name }}, I'm James, CEO of Bugsnag. I wanted to reach out to see if you need any help getting started. Cheers, James Surprise Personal Email

36. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Bad We've missed you on CouchSurfing! It's been a long time since we've seen you around! The last time you logged into CouchSurfing was four months ago. Props to Segment.io

37. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software The Last EmailYouWill Ever Send A lot has changed since you left – so we'd like to offer you another FREE trial! Come back to Netflix and enjoy newly addedTV shows & movies – for free. Now includingWii, PS3, Xbox 360, iPhone, iPad, Android and more. Questions? 1-888-357-1516 / 24 hours a day

44. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software 7. Determine the OMTM At least 7 friends within 10 days of signing up Getting a new user to link a device and add a file Once a user follows 30 people, they’re more or less active forever If someone comes back a day after signing up for a game, that is a leading indicator of them becoming an engaged and paying user.

45. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Post Launch Stages 1. Stickiness USER DISENGAGE D USER ENGAGED USER REACTIVAT E TRIAL OVER PAYING CUSTOMER DISSATISFI ED RESOLUTIO N DISENGAGE D REACTIVAT E CANCEL CANCEL ACCOUNT CANCELLED OR BILLING INFO EXPIRES Free user disengagement Paid Conversion Support Data Reactivaton Rate Freemium Churn Trial Abandonment Rate Disengagement

46. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Post Launch Stages 1. Stickiness 2. Traffic USER DISENGAGE D USER ENGAGED USER REACTIVAT E TRIAL OVER PAYING CUSTOMER DISSATISFI ED RESOLUTIO N DISENGAGE D REACTIVAT E CANCEL CANCEL ACCOUNT CANCELLED OR BILLING INFO EXPIRES Free user disengagement Paid Conversion Support Data Reactivaton Rate Freemium Churn Trial Abandonment Rate Disengagement PAID DIRECT SEARCH WOM Customer Acquisition Cost VISITOR FREEMIUM/ TRIAL OFFER ENROLLME NT Long funnel health INHERENT VITALITY INVITE OTHERS Viral coefficient Viral rate

47. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Post Launch Stages 1. Stickiness 2. Traffic 3. Revenue USER DISENGAGE D USER ENGAGED USER REACTIVAT E TRIAL OVER PAYING CUSTOMER DISSATISFI ED RESOLUTIO N DISENGAGE D REACTIVAT E CANCEL CANCEL ACCOUNT CANCELLED OR BILLING INFO EXPIRES Free user disengagement Paid Conversion Support Data Reactivaton Rate Freemium Churn Trial Abandonment Rate Disengagement PAID DIRECT SEARCH WOM Customer Acquisition Cost VISITOR FREEMIUM/ TRIAL OFFER ENROLLME NT Long funnel health INHERENT VITALITY INVITE OTHERS Viral coefficient Viral rate UPSELLING CAPACITY LIMIT FORMER USERS FORMER CUSTOMERS Tiering Upselling Rate Unpaid Churn Rate Paid Churn Rate User Lifetime Value Customer Lifetime Value

48. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Post Launch Stages 1. Stickiness 2. Traffic 3. Revenue PAID DIRECT SEARCH WOM INHERENT VITALITY Customer Acquisition Cost VISITOR FREEMIUM/ TRIAL OFFER ENROLLME NT USER INVITE OTHERS DISENGAGE D USER ENGAGED USER REACTIVAT E TRIAL OVER PAYING CUSTOMER UPSELLING CAPACITY LIMIT DISSATISFI ED RESOLUTIO N DISENGAGE D REACTIVAT E CANCEL CANCEL ACCOUNT CANCELLED OR BILLING INFO EXPIRES FORMER USERS FORMER CUSTOMERS Long funnel health Free user disengagement Paid Conversion Tiering Upselling Rate Support Data Reactivaton Rate Freemium Churn Trial Abandonment Rate Disengagement Unpaid Churn Rate Paid Churn Rate User Lifetime Value Customer Lifetime Value Viral coefficient Viral rate

49. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software • Measure engagement • DAU/WAU – What does active mean? • Segment • New Functionality • Does it improve stickiness? • How do we measure that? • Lazy registration Stickiness

51. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Viral Coefficent Number of Active Users: 1,000 Number of Invites Sent: 100 Invitation Rate (Invites Sent/Active Users) 10% Acceptance rate (Invites accepted/Invites Sent) If 3 invitees sign up,30% Viral Coefficient = Multiply Invitation Rate X Acceptance Rate (.1 X .3 = o.o3) IdeallyViral Coefficient > 1 Necessary for B2C, likely not a good metric for B2B

52. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Virality Inherent Collaboration Communication PS: I love you, get your free email from http://hotmail.com Incentivized Embeddable Signature Word of Mouth Social

58. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Basics CAC – Customer Acquisition Cost • Marketing cost/# paying customers • Costs you spend on marketing • Include labor LTV – LifeTimeValue • Amount of money you receive while the customer is paying you • LTV = ARPU * (1/Churn Rate) • 1,000 Customers (not free trial users) • $25,000 Revenue • ARPU is $25 • 20% Churn Rate (average length of relationship is 5 months) • LTV = $25 * (1 – 0.02) = $125

59. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Rules ofThumb LTV > 3 * CAC CAC needs to be recovered in less than a year (ideally 3 months) Churn should be 5-7% annually - 0.42-0.58 monthly

62. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Impact of Lowering Churn $(400,000) $(200,000) $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 Net Profit Churn 1.25% Churn 2.5% $(4,000,000) $(3,000,000) $(2,000,000) $(1,000,000) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 Month1 Month3 Month5 Month7 Month9 Month11 Month13 Month15 Month17 Month19 Month21 Month23 Month25 Month27 Month29 Month31 Month33 Month35 Cumulative Net Profit Churn 1.25% Churn 2.5% • Impact of lowering the churn rate is felt more heavily in the later years, as expected • It has a significant impact on the long term profitability of the business Source: David Skok Matrix Partners

63. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software AWell Balanced Business Model Monetization (LTV) Cost to Acquire a Customer (CAC) Source: David Skok Matrix Partners

64. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software The Balancing Act Monetization (LifeTime Value LTV) Cost to Acquire a Customer (CAC) • Viral effects • Inbound Marketing • Free or Freemium • Open Source • Free Trials • Touchless conversion • Inside Sales • Channels • Strategic partnerships • Scalable Pricing • Cross Sell/Upsell • Product line expansion • Lead Gen for 3rd parties Source: David Skok Matrix Partners

65. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software The Balancing Act Monetization (LifeTime Value LTV) Cost to Acquire a Customer (CAC) • Viral effects • Inbound Marketing • Free or Freemium • Open Source • Free Trials • Touchless conversion • Inside Sales • Channels • Strategic partnerships • Field Sales • Outbound Marketing • Scalable Pricing • Cross Sell/Upsell • Product line expansion • Lead Gen for 3rd parties • High Churn Rates • Low customer satisfaction Source: David Skok Matrix Partners

68. ©2013 Pathfinder Software www.PathfinderSoftware.com 888-986-2914 @PathSoft pathfinder-software Need help with the design, development, and launch of your Healthcare or Medical software application? We leverage our experience with FDA and HIPAA compliance to rapidly align your product with government regulations. We increase the rate of success of our clients’ products leveraging Lean Startup + UX + Agile. Call Us Today - 888-986-2914

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